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Calculating Rate of Return on a Company's Reinvested Funds

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Computer Corp. reinvests 60 percent of its earnings in the firm. The stock sells for $50, and the next dividend will be $2.50 per share. The discount rate is 15 percent. What is the rate of return on the company's reinvested funds (i.e. the ROE)?

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We first need to calculate the growth rate associated with the ...

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